The Threat of Substitute Products and Services:The threat of substitute products and services is high in the gaming industry. There will always be different ways for people to spend their free time such as playing outdoor games, board games, computer games, watching TV, etc. The Intensity of Rivalry Among Competitors in an Industry:The intensity of rivalry among competitors in the gaming industry is extremely high. Nintendo, Microsoft, and Sony are always in competition with each other in terms of when their newest product is launching and how great it will be in comparison to their competitors. For example, Nintendo launched its Wii U and immediately after, Microsoft announced their Xbox 360 and Sony announced its PlayStation 3. Also, the exit barriers are pretty high in these industries because the startup costs are so high that if you have the infrastructure and technology purchased it would take a lot for it to be worth giving up. Financial AnalysisOptionsNintendo has multiple options going forward. It’s business model for the last two decadeshad been to sell game consoles and profit off of Nintendo exclusive games (Mario Kart and Pokemon are good examples). They would also of course allow for third parties to create games on their systems. This business strategy worked well for them for many years. Things have changed however and sales of Nintendo’s consoles (Nintendo 3DS and Wii U) fell year after year(see chart below). It is not just Nintendo that was hurt by this but the game console industry overall. The advent of mobile smart phones seemed to replace the need for stand alone mobile gaming devices for many people. We could perhaps blame the drop in TV game console sales on the lower user feedback ratings of Nintendo’s Wii U Console. In our opinion, it simply didn’t launch with the same wow factor of its predecessor, the Wii. In response, Nintendo entered the smartphone gaming market. We saw great success with their first big release, Pokemon GO, which quickly rose to becoming the #1 downloaded game on the Apple app store (Brightman 2016). Although the game's popularity has fallen greatly since, it proved that Nintendo has a huge opportunity with smartphone gaming. Nintendo’s options going forward essentially revolvearound how to get their games to consumers. They could choose to focus on what they know and keep their game consoles as the forefront of their business model. They could also choose to invest more in smartphone games as it appears to be where the market is moving. What makes Nintendo so special is its creative list of exclusive games. They’re very popular and also very profitable. They have the choice of whether to simply focus on these games that drive so much oftheir sales, or to invest in creating new exclusives. RecommendationsOur recommendation for Nintendo would be to increase their focus on smartphone gaming. This chart posted below shows that the future of gaming consoles is getting bleaker by
the year and the opportunities for smartphone gaming are strong.
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- Fall '08
- Video game console, Nintendo